A key discussion point at TradeTech Europe this week was the ongoing push for a consolidated tape and how this can help improve market structure within Europe. However, panellists noted various areas that need to be addressed to ensure a consolidated tape would be successful.
“Before a tape, we need a drastic cleaning of the data in order to make sure that the tape is simply not a garbage in garbage out exercise,” said Emilie Rieupeyroux, head of market strategy, cash equities and data services at Euronext.
“We also need to ensure that we have accurate extensive data helping to distinguish between what’s addressable liquidity, interesting information and non-addressable liquidity which should not even be covered in the tape.”
Elsewhere in the panel, Fabien Oreve, deputy global head of trading and securities financing at Candriam, noted that a consolidated tape could stimulate more investor participation in European equity markets if it increased the visibility of total and addressable liquidity.
“It could also represent an invaluable source of information for listed companies in Europe, and also for the small companies that would like to get listed in the continents,” said Oreve.
“On top of that, showing clearly when and where blocks are traded is extremely useful for small and mid-cap traders. A consolidated tape could help increase the visibility of block trades, but the tape should not be expensive and should not be costly for investors.”
Over the last few years, there has been a lot of regulatory change within Europe, alongside ongoing impacts from the Covid pandemic, Mifid II and Brexit. Some panellists felt that a consolidated tape would be a great benchmark across the whole market – with Alex Dalley, head of Cboe Netherlands at Cboe Europe, noting that “it would be easy if we had a uniform benchmark [in European markets].”
“Having a benchmark that everybody looks at, gives that clarity to everybody in the industry about what’s going on across the whole market. We still spend a lot of time debating what’s OTC, how much is addressable liquidity, etc, when it would be a lot easier to just have that benchmark that we all reference,” said Dalley.
The issue of settlement costs was also discussed among panellists, particularly the fact that settlement costs are higher in Europe despite the fact that clearing costs are similar. This being a result of differences in the post-trade landscape when compared to the US which has one clearing house compared to various settlement systems and clearing houses in Europe.
“Because of the fact that the post-trade landscape is all consolidated through one clearing house and settlement system in the US, you get a lot of netting benefits and not only is the cost a lot cheaper, but the actual netting ability is huge and you just don’t get that in Europe,” added Dalley.
Elsewhere in the panel, the issue of fragmentation and whether competition can help foster better market structure dynamics within Europe was discussed among panellists.
“We need to find a right and logical level for competition. Competition breeds innovation and pragmatic innovation certainly breeds more efficiency for market participants. But endless fragmentation does come with a cost and that’s a tough thing to manage, particularly as costs for IT [and similar developments] are going through the roof,” said Simon McQuoid-Mason, head of equity products UK and Ireland at SIX Swiss Exchange.
Fragmentation was a much-discussed topic on various conference panels this week, with differing viewpoints on its benefits and whether too much fragmentation could be detrimental to the European market landscape.
“When comparing ourselves to US market structure, do we need all the spaghetti on the page [in reference to a displayed chart showing considerable fragmentation in Europe]? Probably not. Actually, we could simplify. Consolidation and pragmatic innovation will help with that,” McQuoid-Mason concluded.